Milk collection and dairy farming in India

8/01/2017

India is probably one of the few, if not the only, country which has the tradition of collecting milk from a large number of small dairy farmers from rural parts. The collected milk from various collection points or centers is transported in tankers to the centralized processing centers for converting to various products such as toned, double toned, full cream etc. milk.

So, what is wrong with this picture? The proponents may ask. Their arguments are typically based on rural employment, scalability and cost efficiency. This in many instances are a valid argument. However, a deeper dive into this industry brings another often hidden facet.

Issues to ponder over:

Payouts to rural small scale (2-3 cows or buffaloes) dairy farmers are typically Rs. 21 to 24 per lit. This is around 35-45% of the retail price of approximately Rs. 50 to 52 per lit. The low payouts to the dairy farmers does not leave any profit margin for them to provide better feed or medical services or improve cattle breed. It remains just a side income for majority of the farmers.

India has a huge milk quality challenge. A large fraction of nation’s milk supply is contaminated or below standard. This is a recurring theme year over year. People in the heat of the moment tend to blame just about anyone and everyone across the whole value chain. Mistakes of the few gets amplified to all.

I tend to believe that real culprit may be the structure of the dairy industry in India. Millions of producers with thousand of collection centers increases the potential touch point for contamination. Even a small inadvertent mistake is amplified given the nature of the product. Couple that with the non-refrigerated milk transportation and the problem further magnifies.

Industry practice of focusing on fat percentage is too narrow a bench mark of quality. Many of the other important metric such as somatic cell count is not even a consideration. Mixing of milk from various animals such as cows and buffaloes is not even considered an issue. Given that milk is a primary source of nutrition (especially protein) for many children, the narrow focus on fat percentage does not help.

Present structure of dairy industry in India was created by the visionary Sardar Patel over 100 years ago. We needed to produce milk for the masses. It was the need of the moment. India, today, stands at a very different spot on economics, demographics and social spectrum. The time has come to take a deeper look into the structure of this important industry.

There are 4 comments in this article:

8/01/2017Himanshu says:

The average procurement rate of Milk from farmers is between 30-35 rupees per liter.
An average farmer has sufficient land to produce green fodder/khal etc. But the challenge here is the lack of Dairy Farming and Breeding knowledge that is where farmers taking a hit.
Due to deeper penetration of industrial milk trading companies farmers are being paid well.

9/01/2017Mani says:

I am unaware of any area where procurement price from farmers is Rs 30-35/Lit. Can you elaborate a bit more.

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